Zaxby’s: $2.66M Average Sales vs. $1.39M-$3.26M Franchise Cost

In this exclusive Franchise Chatter FDD Talk post, you’ll learn the following:

Section I – Estimated initial investment (franchise costs) for a Zaxby’s franchise, based on Item 7 of the company’s 2023 FDD

Section II – Initial franchise fee, royalty fee, and marketing fee for a Zaxby’s franchise, based on Items 5 and 6 of the company’s 2023 FDD

Section III – Number of franchised and company-owned Zaxby’s outlets at the start of the year and the end of the year for 2020, 2021, and 2022, based on Item 20 of the company’s 2023 FDD

Section IV – News updates on the Zaxby’s franchise opportunity

Section V – Presentation and analysis of Zaxby’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2023 FDD, including information on the:

• 2022 average gross revenue, cost of sales (cost of goods sold, labor), gross profit, other operating expenses (royalties, rent and occupancy expense, other operating expenses, advertising expenses, utilities and services), and EBITDA from operations for the 726 franchised Zaxby’s restaurants that were open and operating during the period from October 25, 2021 to October 23, 2022, by quartile

• 2022 average and median EBITDA from operations for the 726 franchised Zaxby’s restaurants that were open and operating during the period from October 25, 2021 to October 23, 2022, by quartile

• 2022 average, median, lowest, and highest gross revenues for the 752 franchised Zaxby’s restaurants that were open and operating during the period December 26, 2021 through December 25, 2022, by quartile

• 2020, 2021, and 2022 average, median, lowest, and highest gross revenues for the franchised Zaxby’s restaurants that were open and operating for all 52 weeks of the applicable fiscal year (the 2021 data includes the financial performance of franchised Zaxby’s restaurants that were open and operating for at least 51 of the 52 weeks of fiscal year 2021)

Section VI – Key ratios, comparables, computations, and analyses for the Zaxby’s franchise opportunity (exclusive content for Platinum subscribers)

Section I – Zaxby’s Franchise Costs

• Zaxby’s franchise costs, based on Item 7 of the company’s 2023 FDD:

• Initial Franchise Fee:  $35,000
• Lease Deposit and Payment:  $10,000 to $19,000
• Utility Deposits:  $0 to $9,000
• Building and Sitework:  $772,000 to $2,200,000
• Architect and Engineer:  $45,000 to $75,000
• Permits and Licenses:  $2,000 to $24,000
• Accounting and Legal Fees:  $500 to $25,000
• Furniture, Fixtures, and Equipment Package:  $410,000 to $440,000
• Technology System:  $60,200 to $92,200
• Signage:  $23,000 to $134,000
• Insurance:  $1,000 to $17,000
• Printing/Business Supplies:  $300 to $1,000
• Initial Marketing Contribution:  $5,200 to $10,000
• Initial Inventory:  $5,000 to $22,000
• Uniforms:  $1,500 to $5,000
• Training Expenses:  $10,000 to $25,000
• Pre-Opening Payroll:  $10,000 to $37,000
• Additional Funds for 3 Months:  $1,000 to $96,000
• Total Estimated Zaxby’s Franchise Costs:  $1,391,700 to $3,266,200

Section II – Zaxby’s Initial Franchise Fee, Royalty Fee, and Marketing Fee

• Zaxby’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2023 FDD:

• Initial Franchise Fee:  $35,000
• Royalty:  6% of Gross Sales for the preceding week
• Weekly Marketing Contributions:  up to 4% of Gross Sales per week (which includes the National Marketing Fund Contribution and either the Co-op Marketing Contribution or the Multi-DMA Advertising Contribution, as described below)
• National Marketing Contribution:  currently, 1.5% of Gross Sales per week (may be modified by Zaxby’s in its discretion but will not exceed 3.5% of Gross Sales)
• Co-op Marketing Contribution or Multi-DMA Advertising Contribution:  up to 3% of Gross Sales per week (as determined by Co-op, Zaxby’s, or its designated affiliate); however, the members of your Co-op may vote to increase the Co-op Marketing Contribution above the 3% cap

Section III – Number of Franchised and Company-Owned Zaxby’s Outlets

Franchised

2020

• Outlets at the Start of the Year:  756
• Outlets at the End of the Year:  762
• Net Change:  +6

2021

• Outlets at the Start of the Year:  762
• Outlets at the End of the Year:  765
• Net Change:  +3

2022

• Outlets at the Start of the Year:  765
• Outlets at the End of the Year:  776
• Net Change:  +11

Company-Owned

2020

• Outlets at the Start of the Year:  149
• Outlets at the End of the Year:  146
• Net Change:  -3

2021

• Outlets at the Start of the Year:  146
• Outlets at the End of the Year:  146
• Net Change:  0

2022

• Outlets at the Start of the Year:  146
• Outlets at the End of the Year:  146
• Net Change:  0

Section IV – News Updates on the Zaxby’s Franchise

• Zaxby’s Strong Southeastern Brand Continues to Expand Out West

• Zaxby’s Successfully Opens First Franchise-Owned To-Go-Only Prototype

• Zaxby’s Franchisee Leader Development Driving Growth

• Zaxby’s Breaks Into the Top 50 on the Franchise Times Top 400

• Zaxby’s Ranked No. 133 on Entrepreneur’s 2024 Franchise 500

Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Zaxby’s Franchise (Item 19, 2023 FDD)

• As of December 25, 2022, Zaxby’s had 922 open and operating Restaurants. Of these 922 Restaurants, 776 of these Restaurants were owned and operated by third-party franchisees that are not owned or controlled by Zaxby’s affiliates (the “Franchised Restaurants”).

• The Franchised Restaurants offer substantially the same products and services as the Restaurants that are the subject of the franchise disclosure document.

• For purposes of this Item 19, the term “Gross Revenues” means all revenues received by a Restaurant as payment for all sales generated through the Restaurant, whether such payment is in cash, by exchange or for credit (and, if for credit, regardless of collection), including revenues received from the operation of vending machines or other mechanical devices, less any revenues taxes collected and transmitted to appropriate taxing authorities.

• The financial performance representation is an historical representation.

Part 1 – Average Gross Revenues and Operating Costs of Franchised Restaurants for Rolling 12-Month Period from October 25, 2021 to October 23, 2022

• Part 1 presents the average Gross Revenues and certain operating costs of 726 Franchised Restaurants (the “Part 1 Measured Restaurants”) that were open and operating during the period from October 25, 2021 to October 23, 2022 (the “Part 1 Period”).

• Part 1 excludes the performance of: (a) 146 Restaurants that were owned or controlled by Zaxby’s affiliate, Zax Restaurants; (b) 24 Franchised Restaurants where sales submitted to Zaxby’s varied from data reported by the Franchised Restaurant point of sale system by more than 10%; (c) 9 Franchised Restaurants that were closed for more than one month during the Part 1 Period; and (d) 17 Franchised Restaurants that opened during the Part 1 Period. No Restaurant permanently closed during the Part 1 Period.

• The Part 1 Measured Restaurants were divided into four categories based on their Gross Revenues, which are classified as: Top Quartile, Second Quartile, Third Quartile. and Bottom Quartile. In Part 1, the Gross Revenues and average operating costs and expenses for each of the categories was calculated by adding the Gross Revenues or certain operating costs and expenses, as applicable, of all Part 1 Measured Restaurants within each quartile and dividing by the total number of Part 1 Measured Restaurants within such quartile. The average Gross Revenues and operating costs and expenses in each quartile were then compared to the average Gross Revenues in such quartile and expressed as a percentage.

Top Quartile (181 Restaurants)

Average Gross Revenue:  $3,668,350 (100.0%)

Cost of Sales

• Subtotal Food and Beverage:  $1,297,900 (35.4%)
• Subtotal Other Cost of Goods Sold:  $139,403 (3.8%)
• Cost of Goods Sold:  $1,437,303 (39.2%)
• Total Cost of Labor:  $826,016 (22.5%)

Gross Profit:  $1,405,030 (38.3%)

Other Operating Expenses

• Royalties:  $215,450 (5.9%)
• Rent and Occupancy Expense:  $172,591 (4.7%)
• Other Operating Expenses:  $213,174 (5.8%)
• Advertising Expenses:  $135,968 (3.7%)
• Utilities and Services:  $68,867 (1.9%)
• Total Other Operating Expenses:  $806,049 (22.0%)

EBITDA from Operations:  $598,981 (16.3%)

Second Quartile (181 Restaurants)

Average Gross Revenue:  $2,805,285 (100.0%)

Cost of Sales

• Subtotal Food and Beverage:  $992,772 (35.4%)
• Subtotal Other Cost of Goods Sold:  $109,769 (3.9%)
• Cost of Goods Sold:  $1,102,541 (39.3%)
• Total Cost of Labor:  $665,445 (23.7%)

Gross Profit:  $1,037,300 (37.0%)

Other Operating Expenses

• Royalties:  $162,444 (5.8%)
• Rent and Occupancy Expense:  $176,831 (6.3%)
• Other Operating Expenses:  $166,943 (6.0%)
• Advertising Expenses:  $102,099 (3.6%)
• Utilities and Services:  $65,542 (2.3%)
• Total Other Operating Expenses:  $673,858 (24.0%)

EBITDA from Operations:  $363,442 (13.0%)

Third Quartile (181 Restaurants)

Average Gross Revenue:  $2,321,809 (100.0%)

Cost of Sales

• Subtotal Food and Beverage:  $829,380 (35.7%)
• Subtotal Other Cost of Goods Sold:  $86,948 (3.7%)
• Cost of Goods Sold:  $916,328 (39.5%)
• Total Cost of Labor:  $569,261 (24.5%)

Gross Profit:  $836,219 (36.0%)

Other Operating Expenses

• Royalties:  $136,448 (5.9%)
• Rent and Occupancy Expense:  $157,409 (6.8%)
• Other Operating Expenses:  $164,171 (7.1%)
• Advertising Expenses:  $87,065 (3.7%)
• Utilities and Services:  $61,118 (2.6%)
• Total Other Operating Expenses:  $606,211 (26.1%)

EBITDA from Operations:  $230,008 (9.9%)

Bottom Quartile (183 Restaurants)

Average Gross Revenue:  $1,698,034 (100.0%)

Cost of Sales

• Subtotal Food and Beverage:  $613,697 (36.1%)
• Subtotal Other Cost of Goods Sold:  $68,168 (4.0%)
• Cost of Goods Sold:  $681,865 (40.2%)
• Total Cost of Labor:  $455,732 (26.8%)

Gross Profit:  $560,438 (33.0%)

Other Operating Expenses

• Royalties:  $95,414 (5.6%)
• Rent and Occupancy Expense:  $155,997 (9.2%)
• Other Operating Expenses:  $139,667 (8.2%)
• Advertising Expenses:  $60,285 (3.6%)
• Utilities and Services:  $56,205 (3.3%)
• Total Other Operating Expenses:  $507,567 (29.9%)

EBITDA from Operations:  $52,871 (3.1%)

All Measured Restaurants

Average Gross Revenue:  $2,623,370 (100.0%)

Cost of Sales

• Subtotal Food and Beverage:  $933,437 (35.6%)
• Subtotal Other Cost of Goods Sold:  $101,072 (3.9%)
• Cost of Goods Sold:  $1,034,509 (39.4%)
• Total Cost of Labor:  $629,114 (24.0%)

Gross Profit:  $959,747 (36.6%)

Other Operating Expenses

• Royalties:  $152,439 (5.8%)
• Rent and Occupancy Expense:  $165,707 (6.3%)
• Other Operating Expenses:  $170,989 (6.5%)
• Advertising Expenses:  $96,354 (3.7%)
• Utilities and Services:  $62,933 (2.4%)
• Total Other Operating Expenses:  $648,421 (24.7%)

EBITDA from Operations:  $311,326 (11.9%)

• Part 1 is not a profit and loss statement. The cost and expense information in Part 1 pertains only to the cost of goods sold, labor costs, and other operating expenses experienced by the Part 1 Measured Restaurants. You may experience capitalized or other balance sheet expenditures that are not included in this cost and expense information, such as the cost of additional or replacement equipment, debt payments, and interest expenses.

• For purposes of this Item 19, the term “EBITDA” shall mean Gross Revenues less cost of goods sold, labor costs (excluding officer salaries), and all other operating expenses (excluding interest, taxes, depreciation, and amortization).

• The following table discloses the number and percentage of Part 1 Measured Restaurants in each quartile above the average EBITDA disclosed in Part 1 for each quartile and the median EBITDA for each quartile:

Top Quartile

• Restaurant Count:  181
• Average EBITDA from Operations:  $598,981
• Number of Restaurants in Quartile Above Average EBITDA for Quartile:  82
• Percentage of Restaurants in Quartile Above Average EBITDA for Quartile:  45.3%
• Median EBITDA from Operations:  $574,571

Second Quartile

• Restaurant Count:  181
• Average EBITDA from Operations:  $363,441
• Number of Restaurants in Quartile Above Average EBITDA for Quartile:  85
• Percentage of Restaurants in Quartile Above Average EBITDA for Quartile:  47.0%
• Median EBITDA from Operations:  $352,435

Third Quartile

• Restaurant Count:  181
• Average EBITDA from Operations:  $230,008
• Number of Restaurants in Quartile Above Average EBITDA for Quartile:  98
• Percentage of Restaurants in Quartile Above Average EBITDA for Quartile:  54.1%
• Median EBITDA from Operations:  $236,994

Bottom Quartile

• Restaurant Count:  183
• Average EBITDA from Operations:  $52,870
• Number of Restaurants in Quartile Above Average EBITDA for Quartile:  92
• Percentage of Restaurants in Quartile Above Average EBITDA for Quartile:  50.3%
• Median EBITDA from Operations:  $53,622

• Labor costs in Part 1 do not include officers’ salaries and benefits for any Part 1 Measured Restaurant that captures or recognizes that expense.

• Labor costs will vary from location to location and will depend on local factors, including (without limitation) local minimum wage laws and local labor market conditions.

• Because you will need a certain number of employees to open and operate a Restaurant regardless of its Gross Revenues, Restaurants that have lower than average Gross Revenues typically experience higher than average labor costs as a percentage of Gross Revenues.

Part 2 – Average Gross Revenues of Franchised Restaurants in Fiscal Year 2022

• Part 2 presents the Average Gross Revenues of 752 Franchised Restaurants (the “Part 2 Measured Restaurants”) that were open and operating during the period December 26, 2021 through December 25, 2022 (the “Part 2 Period”).

• Part 2 excludes the performance of: (a) 146 Restaurants that were owned or controlled by Zaxby’s affiliate, Zax Restaurants; (b) 7 Franchised Restaurants that were closed for more than one month during the period; (c) 17 Franchised Restaurants that opened during the Part 2 Period; and (d) 5 Franchised Restaurants that closed during the Part 2 Period.

Top Quartile

• Restaurant Count:  188
• Average Gross Revenues:  $3,723,577
• Number of Restaurants Above Average Gross Revenues:  77
• Percentage of Restaurants Above Average Gross Revenues:  41.0%
• Median Gross Revenues:  $3,560,606
• Lowest Gross Revenues:  $3,110,398
• Highest Gross Revenues:  $5,869,839

Second Quartile

• Restaurant Count:  188
• Average Gross Revenues:  $2,850,239
• Number of Restaurants Above Average Gross Revenues:  90
• Percentage of Restaurants Above Average Gross Revenues:  47.9%
• Median Gross Revenues:  $2,845,782
• Lowest Gross Revenues:  $2,593,690
• Highest Gross Revenues:  $3,109,445

Third Quartile

• Restaurant Count:  188
• Average Gross Revenues:  $2,357,504
• Number of Restaurants Above Average Gross Revenues:  94
• Percentage of Restaurants Above Average Gross Revenues:  50.0%
• Median Gross Revenues:  $2,355,936
• Lowest Gross Revenues:  $2,104,596
• Highest Gross Revenues:  $2,593,687

Bottom Quartile

• Restaurant Count:  188
• Average Gross Revenues:  $1,718,367
• Number of Restaurants Above Average Gross Revenues:  109
• Percentage of Restaurants Above Average Gross Revenues:  58.0%
• Median Gross Revenues:  $1,791,610
• Lowest Gross Revenues:  $890,988
• Highest Gross Revenues:  $2,095,656

All Measured Restaurants

• Restaurant Count:  752
• Average Gross Revenues:  $2,662,422
• Number of Restaurants Above Average Gross Revenues:  355
• Percentage of Restaurants Above Average Gross Revenues:  47.2%
• Median Gross Revenues:  $2,593,688
• Lowest Gross Revenues:  $890,988
• Highest Gross Revenues:  $5,869,839

Part 3 – Average Annual Gross Revenues of Franchised Restaurants in Fiscal Year 2020, 2021, and 2022

• Part 3 below shows the average annual Gross Revenues of Franchised Restaurants for Zaxby’s 2020, 2021, and 2022 fiscal years.

2020

• Restaurant Count:  725
• Average Gross Revenues:  $2,256,060
• Percentage Change Over Previous Year:  –
• Number of Restaurants Above Average Gross Revenues:  357
• Percentage of Restaurants Above Average Gross Revenues:  49.2%
• Median Gross Revenues:  $2,237,850
• Lowest Gross Revenues:  $630,400
• Highest Gross Revenues:  $4,284,533

2021

• Restaurant Count:  727
• Average Gross Revenues:  $2,544,354
• Percentage Change Over Previous Year:  12.8%
• Number of Restaurants Above Average Gross Revenues:  344
• Percentage of Restaurants Above Average Gross Revenues:  47.3%
• Median Gross Revenues:  $2,497,295
• Lowest Gross Revenues:  $839,494
• Highest Gross Revenues:  $5,331,733

2022

• Restaurant Count:  752
• Average Gross Revenues:  $2,662,422
• Percentage Change Over Previous Year:  4.6%
• Number of Restaurants Above Average Gross Revenues:  355
• Percentage of Restaurants Above Average Gross Revenues:  47.2%
• Median Gross Revenues:  $2,599,688
• Lowest Gross Revenues:  $890,988
• Highest Gross Revenues:  $5,869,839

• Zaxby’s 2020 fiscal year began on December 30, 2019 and ended on December 27, 2020.

• Zaxby’s 2021 fiscal year began on December 28, 2020 and ended on December 26, 2021.

• Zaxby’s 2022 fiscal year began on December 27, 2021 and ended on December 25, 2022.

• The 2020 data includes the Gross Revenues of 725 Franchised Restaurants that were open and operated for all 52 weeks of the 2020 fiscal year and excludes the performance of: (a) 25 Franchised Restaurants that closed for one week or more during the 2020 fiscal year; and (b) 10 Franchised Restaurants that opened during the 2020 fiscal year.

• The 2021 data includes the Gross Revenues of 727 Franchised Restaurants that were open and operated for at least 51 of the 52 weeks of the 2021 fiscal year and excludes the performance of: (a) 29 Franchised Restaurants that temporarily closed for more than one week during the 2021 fiscal year; and (b) 9 Franchised Restaurants that opened during the 2021 fiscal year.

• The 2022 data includes the Part 2 Measured Restaurants.

• Some Restaurants have sold or earned this amount. Your individual results may differ. There is no assurance that you’ll sell or earn as much.

• This Item 19 was prepared utilizing data Zaxby’s received in the periodic sales reports provided to it by its franchisees and through daily polling of Point of Sale (POS) data. Zaxby’s has not independently verified any of the data provided to it, but its franchisees pay its franchising fees based on such reports. Additionally, Zaxby’s cannot verify that the information it receives from its franchisees is prepared uniformly or that its franchisees properly allocate costs to a particular category.

Section VI – Zaxby’s Franchise Ratios, Comparables, Computations, and Analyses (Exclusive Content for Platinum Subscribers) ⬇️